How debit, credit score and ‘pay later’ playing cards differ from one another

Adhil Shetty, CEO, BankBazar.com, says, “While debit playing cards permit you to entry your current funds in a financial savings checking account, bank cards permit you to entry credit score. Credit line playing cards or ‘pay later’ playing cards are those who permit you to make purchases after which cut up the invoice in three or extra installments.”

For occasion, slice ‘pay later’ playing cards permit you to cut up your month-to-month spending equally over three months with no extra costs. On the opposite hand, Uni ‘pay later’ playing cards go a step past the transaction degree. In the case of Uni, you may select the transactions for which you need to pay in full and pay the remaining over the following three months. The ‘pay later’ playing cards issued by fintech companies usually give attention to millennials who’re digitally energetic however should not have a credit score historical past. The fintech companies give these playing cards to them with a credit score restrict as little as ₹2,000. However, the cardboard’s restrict will increase dynamically over a interval as they spend extra and make repayments of the invoice on time.

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Credit vs ‘pay later’ playing cards

‘Pay later’ playing cards are an rising type of small-ticket loans bundled in a card, focused at millennials and Gen-Z clients. In distinction, bank card issuers have particular pre-defined eligibility standards. This manner, shoppers with none credit score historical past or these with very meagre earnings can get a ‘pay later’ card. However, getting a bank card relies on the person’s creditworthiness, compensation behaviour and stability of earnings.

Raj Khosla, founder and MD, MyMoneyMantra.com, says the credit score restrict prolonged on a ‘pay later’ card is usually comparatively lower than what is obtainable on a bank card. On a ‘pay later’ card, credit score restrict begins from ₹2,000 and might go as much as a most of ₹10 lakh, whereas credit score limits on a bank card usually start from ₹20,000. There is not any higher ceiling on bank card limits because the lender can improve your credit score restrict as per your utilization, earnings and frequency of spending.

“As of now, ‘pay later’ playing cards solely present the ability of splitting the transaction quantity into three equal installments, whereas bank cards provide longer equated month-to-month installments (EMIs) facility that may stretch as much as 36 months,” added Khosla.

Further, in ‘pay later’ playing cards, you don’t need to pay revolving curiosity, i.e., there isn’t a curiosity charge utilized on new purchases when you make partial invoice compensation. However, within the case of bank cards, should you make late or partial funds, curiosity is charged from the date of the transaction. Sachin Vasudeva, affiliate director and head, bank cards, Paisbaazaar.com, says the most important downside of a bank card is the high-interest fee on revolving credit score. This means even just a few missed funds can push you right into a debt spiral. “The curiosity rate-credit card finance costs on revolving credit score are considerably excessive at 30%-45% each year whereas ‘pay later’ playing cards cost 20%-30% (non-revolving) in case of non-payment,” says Vasudeva.

Yet, the advantages and rewards provided on a bank card are typically increased and extra various than the advantages out there on a ‘pay later’ card. ‘Pay later’ playing cards present round 1% cashback on well timed invoice fee; bank cards provide a number of different advantages akin to cashback, reward factors, reductions, and air miles. says Khosla, “Users can select the kind of bank card based on their spend patterns to avail most advantages, whereas the benefits in ‘pay later’ playing cards are comparable throughout the board.”

Debit vs Credit/Pay later playing cards

Debit playing cards, bank cards and ‘pay later’ playing cards are all various kinds of fee choices. “The comparability of debit playing cards with credit score or ‘pay later’ playing cards is outrightly unfair as the previous represents your money in financial institution accounts, whereas credit score and pay-later playing cards are a type of unsecured mortgage that’s bundled right into a plastic (card).” Moreover, after transactions made with credit score and ‘pay later’ playing cards, you stay obligated to honour payments arising sooner or later. In distinction, funds by debit playing cards imply you compromise the transaction instantly upon spending.

Vasudeva says, “Since debit playing cards are instantly linked to your financial savings or present account, it’s higher to make use of them for small bills and ATM withdrawals—usually these you may handle to pay upfront with out exhausting your financial savings. Debit playing cards permit you to withdraw money from ATMs freed from cost. But withdrawing money utilizing a credit score or ‘pay later’ card will entice hefty rate of interest costs as these transactions are handled as money advances.”

Mint take

You can use these playing cards at on-line and offline shops, ATMs and level of sale (PoS) terminals. The advantages and rewards related to these playing cards are purely subjective to the character of the transaction. To get the utmost advantages, it’s best to use these playing cards interchangeably as per the character of the transactions you might be doing.

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